Deon v. Barasch
Opinion of the Court
In this civil rights action, Pasquale T. Deon, Sr., and Maggie Magerko ("Plaintiffs") challenge the constitutionality of Section 1513 of the Pennsylvania Gaming Act, 4 Pa. C.S. § 1513, under the First Amendment and the Equal Protection Clause of the Fourteenth Amendment. Presently before the court is Plaintiff's motion for summary judgment seeking declaratory and injunctive relief. For the reasons that follow, the court will grant Plaintiff's motion.
I. Factual Background and Procedural History
The facts relevant to the disposition of this matter are not in dispute. Plaintiff Deon is a shareholder of Sands Pennsylvania Inc., a company owning a 90 percent interest in Sands Bethworks Gaming LLC ("Sands"), a privately held gaming business licensee under the Gaming Act. (Doc. 47, ¶¶ 1, 2.) Plaintiff Magerko is the beneficiary of a trust that is the owner of Nemacolin Woodlands, Inc. ("Nemacolin"). (Id. at ¶ 10.) Nemacolin owns Woodlands Fayette, LLC ("Woodlands"), a privately held gaming business licensee under the Gaming Act. (Id. at ¶¶ 10, 11.) Both plaintiffs applied to the Pennsylvania Gaming Control Board ("Board") to be licensed as a "principal"
Plaintiff Deon filed the initial complaint in this matter on August 15, 2017. (Doc. 1.) Defendants filed an answer with affirmative *441defenses on September 29, 2017. (Doc. 32.) On October 20, 2017, Plaintiffs filed an amended complaint, and Defendants again filed an answer with affirmative defenses on November 3, 2017. (Docs. 34, 38.) Plaintiffs filed the instant motion for summary judgment on January 16, 2018. (Doc. 46.) The matter has been fully briefed and is ripe for disposition.
II. Discussion
Plaintiffs argue that Section 1513 of the Gaming Act is unconstitutional under the First Amendment and the Equal Protection Clause of the Fourteenth Amendment because it prohibits certain classes of people, e.g. gaming-license applicants, licensees, and principals of licensees, from making any political contributions. In pertinent part, Section 1513 provides:
The following persons shall be prohibited from contributing any money or in-kind contribution to a candidate for nomination or election to any public office in this Commonwealth, or to any political party committee or other political committee in this Commonwealth or to any group, committee or association organized in support of a candidate, political party committee or other political committee in this Commonwealth:
(1) An applicant for a slot machine license, manufacturer license, supplier license, principal license, key employee license, interactive gaming license or horse or harness racing license.
(2) A slot machine licensee, licensed manufacturer, licensed supplier, interactive gaming operator or licensed racing entity.
(3) A licensed principal or licensed key employee of a slot machine licensee, licensed manufacturer, licensed supplier, interactive gaming operator or licensed racing entity.
4 Pa. C.S. § 1513. A "political committee" is defined as "[a]ny committee, club, association or other group of persons which receives contributions or makes expenditures." 4 Pa. C.S. § 1513(d). Section 1513(c) establishes penalties for unlawful contributions including civil fines and misdemeanors. Plaintiffs aver that they desire to make political contributions, but have been unable to do so for fear of incurring fines or risking criminal prosecution under the Gaming Act.
A. Legal Standards
Summary judgment is appropriate where "there is no genuine issue as to any material fact and [ ] the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c) ; Pearson v. Component Tech. Corp. ,
The First Amendment, applicable to the States through the Fourteenth Amendment, prohibits the enactment of laws "abridging the freedom of speech." U.S. Const., Amdt. 1. As a general principle, the First Amendment prohibits the government from restricting expression "because of its message, its ideas, its subject matter, or its content."
*442Ashcroft v. Am. Civil Liberties Union ,
In the context of elections for government office, the Supreme Court has opined that "[t]here is no right more basic in our democracy than the right to participate in electing our political leaders." McCutcheon v. Fed. Election Comm'n ,
B. Sufficiently Important Governmental Interest
The Commonwealth bears the burden of proving the constitutionality of Section 1513. McCutcheon ,
The General Assembly has a compelling interest in protecting the integrity of both the electoral process and the legislative process by preventing corruption and the appearance of corruption which may arise through permitting any type of political campaign contributions by *443certain persons involved in the gaming industry and regulated under this part.
Banning all types of political campaign contributions by certain persons subject to this part is necessary to prevent corruption and the appearance of corruption that may arise when political campaign contributions and gaming regulated under this part are intermingled.
4 Pa. C.S. § 1102 (10.1) ; (10.2).
The stated purpose of the law is legitimate and commendable to the extent it seeks to prohibit corruption or the appearance of corruption, yet a laudable purpose is not dispositive as to the law's constitutionality. The Commonwealth's brief is largely dedicated to addressing two questions that are not in dispute: (1) that preventing corruption is a legitimate governmental interest; and (2) that a wholesale ban on political contributions would tend to inhibit political corruption. (Doc. 54, pp. 8-15.) The first was well-settled by McCutcheon and the second is beyond reasonable debate. The Commonwealth, however, had made no showing of a heightened need to preclude all political contributions beyond the purpose recognized in McCutcheon . The Commonwealth's justification appears to rely entirely on historical assumptions that gaming is an industry rife with potential for corruption. The legislative histories Defendants cite refer to neither actual instances of corruption in Pennsylvania, nor any studies done to determine if pervasive corruption exists, or discuss that a limitation only on large contributions was insufficient. Without any real evidence that the complained-of harm exists within the Commonwealth, the legislative purpose amounts to no more than the "mere conjecture" that the Supreme Court took issue with in McCutcheon .
"But in general, courts have deferred to legislative determinations that contribution restrictions are a necessary prophylactic measure in combatting potential corruption. In addition, the Supreme Court has instructed that the quantum of empirical evidence needed to satisfy heightened judicial scrutiny of legislative judgments will vary up or down with the novelty and plausibility of the justification raised." Ball v. Madigan ,
While Plaintiff Deon is significantly involved in the management of a gaming licensee, there is no contention that Plaintiff Magerko has any direct involvement with the industry. She is the beneficiary of a trust that owns a stake in a single licensee, yet the law makes no distinction between the two when it comes to banning political contributions. Thus, under Nixon , *444there may be cause for some increased scrutiny of the legislature's determination. The Commonwealth and Campaign Amici point to several cases where courts have held wholesale bans in other industries appropriate. These cases are distinguishable, however, because they do not deal with licensees, but those who do business directly with the government and those whose business it is to influence government officials. See Wagner v. Fed. Election Comm'n ,
C. Closely Drawn to Achieve a Sufficiently Important Interest
The court will next discuss the second prong of the modified intermediate scrutiny analysis: whether the law is "closely drawn" to achieve the government's legitimate interest. Several cases cited by the parties discuss when a political contribution ban is closely drawn. Therefore, the court will review and distinguish these cases to aid its analysis.
1. Depaul
Likely the most pertinent case and certainly the most factually similar, the Supreme Court of Pennsylvania had previously declared Section 1513 unconstitutional under the Pennsylvania Constitution in DePaul v. Commonwealth of Pennsylvania ,
The Pennsylvania Supreme Court undertook a survey of other states that allowed gaming to determine whether those states restricted political contributions from individuals affiliated with the gaming industry and, if so, to what extent. As of 2009, the Court identified twenty states that authorized commercial casinos or *445horse-race betting: Colorado, Delaware, Florida, Illinois, Indiana, Iowa, Louisiana, Maine, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, Oklahoma, Rhode Island, South Dakota, West Virginia, and, of course, Pennsylvania.
The Pennsylvania Supreme Court concluded that, although the stated purpose of preventing corruption or the appearance of corruption was a legitimate governmental interest, the wholesale contribution ban was not narrowly tailored to achieve that goal. The Court reasoned that: "Banning all contributions is not a narrowly drawn means of furthering a policy of negating the corrupting effect and appearance of large contributions. It totally bans a protected form of political expression and association which is unrelated to the identified interest, and does so despite the availability of more narrowly tailored restrictions." DePaul ,
In the wake of the DePaul decision, the Pennsylvania legislature amended the legislative purpose of the Gaming Act with the express purpose of remedying the constitutional deficiency discussed by the Pennsylvania Supreme Court. (Doc. 54-3, p. 13.) The Commonwealth now argues that the legislative purpose amendment providing that political contributions in any amount rather than just large contributions are likely to result in quid pro quo corruption cures the constitutional defect of a wholesale ban on political contributions. In reaching its decision, the DePaul Court cited the reasoning of a New Jersey intermediate appellate court and the Supreme Court of Louisiana that each found similar political contribution bans constitutional under their respective state constitutions. As both cases are again relied upon by the Commonwealth, the court will address them herein.
2. Soto and Casino Association
In Petition of Soto ,
Citing Buckley , the New Jersey court initially held that preventing corruption and its appearance is a significant governmental interest. The Soto court then reasoned that a comprehensive ban was a valid limit on free speech. In doing so, it referred to the context in which the New Jersey law was enacted. The New Jersey constitution expressly forbade gambling in the state until 1976. N.J. Const., Art. IV, § VII; see also Knight v. Margate ,
The need for the type of restriction embodied in § 138 was identified by the State Commission of Investigation (SCI) in its April 1977 report to the Governor and Legislature, entitled Report and Recommendations on Casino Gambling. The report noted that, "contributions by casino licensees, both corporate and individual, give the appearance of attempting to "buy" political influence and favoritism and in fact have the very real potential for causing such favoritism to occur.... The State Commission of Investigation is inclined to recommend[ ]
*447an absolute prohibition against any licensee of the state regulatory authority, whether it be an individual, corporation or so-called "holding company[,]" from making a contribution to any political candidate, party or campaign organization within this State, either directly or indirectly.
Soto ,
In Casino Association of Louisiana v. State ex rel. Foster ,
The Louisiana Supreme Court held that the ban was closely drawn under the First Amendment because, although it was expansive with respect to the individuals that it covered, it did not extend to independent expenditures. In doing so, the Court declined to follow its prior holding in Penn v. State ex rel. Foster ,
Like the New Jersey Superior Court in Soto , the Louisiana Court examined the state's tumultuous history with gambling
I think that this industry stands onto itself and ought to stand onto itself as one that we ought to be singling out for the purpose of trying to limit their involvement in the legislative process and unfortunately I think it is appropriate to look to what has happened over the course of the past couple of years specifically on how individuals within the industry have been accused of attempting to influence the legislative process based upon the industry's entry into the state ... it is directed to specifically [sic] at the gambling industry and to say we believe in Louisiana; we ought to limit the gambling industry's influence in the political process.
....
I will say this about this particular bill. I don't know of any other industry that was singled out in the past campaign as something for the public to look at when you had gubernatorial candidates, you had legislative candidates saying I'm not going to take money from the gambling industry or making a campaign issue over where contributions came from. This is a major, major source of concern in the minds of the public from my viewpoint as to what influence the gambling industry has had over this legislature and this government during its infancy in Louisiana and I think it is an appropriate bill to advance in the legislature to say that we are going to say it is not appropriate for the gambling industry to be making political contributions.
See Committee on Senate and Governmental Affairs, Verbatim Transcript Meeting of March 26, 1996, Senate Bill 12, quoted in Casino Ass'n of Louisiana ,
3. Ball
The most recent federal court decision on industry-specific campaign finance prohibitions is Ball v. Madigan ,
The Ball court next analyzed whether an outright ban on campaign contributions is *450closely drawn to avoid unnecessary abridgment of associational freedoms. Id. at 1013 (citations omitted). The court noted that "[s]everal features of § 9-45 render it plainly disproportional to the government's interest in preventing quid pro quo corruption or its appearance. First, § 9-45 is a disproportionate measure in that it imposes an outright ban on contributions, rather than a mere dollar limit on contribution amounts." Id. at 1014. Comparing the Illinois ban to other campaign finance limitations, the court explained that limits were favored over outright bans barring a showing of a greater and specific need for wholesale prohibitions. The court cautioned against the "heavy handed prophylaxis-upon-prophylaxis approach," where Illinois had general campaign finance contribution limitations that had not been shown ineffective in preventing the risk of corruption specific to the medical cannabis industry. Id. (citing McCutcheon ,
The court expressly distinguished Soto and Casino Association , because the government in both cases had supported the gaming-specific ban with evidence of corruption unique to the gaming industry. Id. at 1016. "By contrast, [Illinois] offered no evidence of actual corruption, in Illinois or elsewhere, involving the medical cannabis industry;" instead, the Illinois government relied only on "five news reports as evidence of an appearance of corruption." Id. Without more, the court found that these reports "provide no reason to suspect that the appearance of corruption is a problem unique to the medical cannabis industry, rather than a problem afflicting highly regulated industries in general, so as to justify the targeted approach." Id. The Ball court distinguished the Illinois Supreme Court's decision in Schiller Park Colonial Inn, Inc. v. Berz ,
4. Whether Section 1513 is closely drawn to achieve the Commonwealth's substantially important purpose
"In determining whether a restriction is closely drawn, courts assess the *451means-end fit between the restriction and the asserted government interest. The restriction need not be the least restrictive means available of promoting the interest, but it must be reasonably proportional to the interest while avoiding needless infringement of First Amendment rights." Ball v. Madigan ,
Soto and Casino Association are both readily distinguishable. Along with DePaul , both were decided prior to the Supreme Court's decision in McCutcheon . Initially, both Louisiana and New Jersey had a long and sordid history related to gambling, upon which the strict limitations were founded. The Supreme Court of Louisiana and the intermediate New Jersey appellate court both referred to the history of corruption and illegal activity associated with gambling in the respective jurisdictions. The court has no evidence of a similar historical background in Pennsylvania.
Although the Commonwealth correctly argues that a state's legislature may look to the experiences and studies of other jurisdictions instead of creating redundant investigations, see DePaul ,
Moreover, the restrictions in place in Louisiana and New Jersey were less restrictive than the Pennsylvania ban despite a greater justification for a wholesale ban. The Louisiana ban applied broadly to individuals associated with the industry, covering licensees and those who held an interest in licensees, and even extended to the spouses of those individuals. It was more limited, however, in the types of contributions that it prohibited as it did not extend to independent expenditures.
The Pennsylvania Supreme Court in DePaul recognized the distinction between an effective limitation and an impermissible ban. The Court found that the legislature had determined that large contributions from those connected with the gaming industry were likely to result in the appearance *453of corruption, as evidenced in the legislative purpose of the statute, yet, in amending Section 1513, the legislature banned all contributions of any amount. Indeed, the legislature did little more than replace the word "large" with the word "any" and assumed this rendered the ban constitutional. While the DePaul Court did not foreclose the possibility that a wholesale ban may be appropriate, the Court concluded that the legislature had not determined that such an expansive ban was necessary to achieve the substantially important purpose. Of course, further legislative investigation could have shown cause why the purpose should be amended to include contributions of any size, yet no such showing was made. The Supreme Court has since reiterated that a limitation must be proportional to the interest served. McCutcheon ,
In order to be closely drawn, the specifics of the ban must hew closely to the needs of the actual legitimate governmental purpose: preventing quid pro quo corruption. The Supreme Court in McCutcheon did not hold that large contributions are inherently evil, but instead held that they are censurable because they have a demonstrable tendency to lead to corruption. This must be the actual goal and the actual effect of any abrogation of First Amendment rights. A wholesale prohibition of contributions of any amount by citizens with even an attenuated connection to the gaming industry far exceeds the necessary scope of a prohibition seeking to eliminate corruption. For example, under Section 1513, a donation of $1 would trigger the prohibitions and penalties in the Gaming Act, yet there is at most an infinitesimal chance that a political candidate would be influenced by or even notice such a small amount. In this context, Section 1513's breadth is excessive. It strains credulity to conclude that a contribution of a single dollar from the beneficiary of a trust that owns a minority stake in a holding company that, in turn, owns a gaming licensee would give even the barest suggestion of a corrupt influence. Under Section 1513, however, this conduct would be subject to fines and penalties and perhaps criminal prosecution.
The court considers partially enjoining the ban, yet doing so would require undue intrusion into the purview of the legislature. The line at which "mere influence" transforms into corruption is an admittedly fine one. See McCutcheon ,
III. Conclusion
For the foregoing reasons, the court concludes that Section 1513 of the Gaming Act furthers a substantially important state interest, but is not closely drawn to achieve that interest. Thus, Section 1513 is an unconstitutional abrogation of the First Amendment right to political association of Plaintiffs and those similarly situated. Accordingly, the court will enjoin its enforcement.
The term "principal" is defined as "[a]n officer; director; person who directly holds a beneficial interest in or ownership of the securities of an applicant or licensee; person who has a controlling interest in an applicant or licensee, or has the ability to elect a majority of the board of directors of a licensee or to otherwise control a licensee ..." Prior to 2006, this classification was defined as a "key employee qualifier." See 2006 Pa. Legis. Serv. Act 2006-135 (S.B. 862) (Nov. 1, 2006);
Between the time DePaul appealed to the Pennsylvania Supreme Court and the present date, Kansas, Maryland, Massachusetts, and Ohio have legalized some form of gaming. It does not appear that Kansas limits political contributions from gaming licensees. Ohio prohibits public officials with a "gaming regulatory function" from investing in or controlling a casino, casino holding company, or gaming-related vendor. R.O.C. § 102.03(L). Massachusetts prohibits campaign contributions from a "gaming license[e], [ ] any holding, intermediary or subsidiary company thereof, [ ] any officer, director, key gaming employee or principal employee of an applicant for a gaming license." Mass. Gen. Laws Ann. ch. 23K, § 46. Massachusetts also has several regulatory disclosure requirements for other political contributions.
The Iowa Code related to gaming was amended in 2015. Relevantly, under current Iowa law, only a "qualified sponsoring organization" ("QSO") is prohibited from making political contributions. A QSO is defined as "a non-profit entity that is licensed by the state to operate the gambling games itself or [ ] contract with another person or entity to operate the games." Cmty. Action Agency of Siouxland v. Belle of Sioux City, L.P. , No. 16-cv-4141,
The Louisiana ban was amended in 2002 to expressly exempt contributions that were not made directly or indirectly to finance a candidate's campaign. 2004 La. Sess. Law Serv. Act 760 (H.B. 510).
The Casino Association Court quoted the dissent from the Penn Court's majority:
The Louisiana Constitution of 1879 declared gambling a "vice" and the Legislature was directed to enact laws for its suppression. LA. CONST. art. 172 (1879). Louisiana's Constitutions of 1898, 1913, and 1921 all contained similar provisions regarding gambling. See LA. CONST. art. 19, Sec. 8 (1921); LA. CONST. arts. 178, 188, 189 (1913); LA. CONST. arts. 178, 188, 189 (1898). Although the delegates to the Constitutional Convention which convened on January 5, 1973, eliminated the moral condemnation of gambling and chose to suppress gambling rather than prohibit it, it is clear that the Legislature continued its role of defining gambling.
Penn ,
With the boom of the petrochemical industry during the 1970s and 1980s, the State's economy was revitalized. There was no longer a need for gambling proceeds to fund government projects, that is until the bottom fell out of the oil industry. However, when the State's economy went into a tailspin with the decline in the oil industry, the State Legislature, armed with its constitutional authority to "define gambling," turned to legalized gambling as a means out of the fiscal doldrums. In a series of enactments in 1991 and 1992, the Legislature passed four acts providing for the licensing of gaming, to-wit: at a land-based casino in New Orleans, La. R.S. 4:601 -686; on cruise ships operating out of New Orleans, La. R.S. 14:90(B) ; on river boats operating on designated rivers in the state, La. R.S. 4:501 -562; and by means of video poker machines located throughout the State, La. R.S. 33:4862.1 -19.
Casino Ass'n of Louisiana ,
Amici Campaign Legal Center and Common Cause ("Campaign Amici ") seem to suggest that this would be a more apt prohibition, and the Pennsylvania legislature actually considered and rejected a similar amendment. (Doc. 54-2, pp. 57-58.) In their brief in opposition to Plaintiffs' motion for summary judgment, Campaign Amici argue that candidates are apparently strong-arming those in the gaming industry into contributing to their campaigns and that the ban actually protects those in the gaming industry by giving them a statutory excuse to refuse to contribute. (Doc. 55, p. 30-31.) Curiously, Campaign Amici do not suggest that the law should in any way punish these hypothetical candidates who threaten those in the gaming industry; yet those who succumb to coercion should be subject to criminal penalties.
The Commonwealth argues that Section 1513 does not apply to independent expenditures. (Doc. 54, p. 23.) This is not clear, however, from the text of the statute. Section 1513 prohibits contributions to "any ... other political committee in this Commonwealth" or to any "group, committee, or association organized in support of a ... political committee in this Commonwealth." 4 Pa. C.S. 1513(a). Political committee is defined as "Any committee, club, association or other group or person which receives contributions or makes expenditures." 4 Pa. C.S. 1513(d). In the absence of any regulatory or administrative guidance, it is unclear whether this section was intended to encompass independent expenditures or other types of political contributions beyond direct or indirect campaign contributions. A plain reading of the statute, however, would include such contributions. Even if the ban did not extend to independent expenditures, the court would still find that it is not closely drawn to achieve its purpose.
The Illinois ban in Schiller Park also was limited in its definition of a licensee. It applied only "where more than 5% Of [sic] the licensee's gross income is derived from the sale of alcoholic liquor." Schiller Park ,
Reference
- Full Case Name
- Pasquale T. DEON, Sr., and Maggie Hardy Magerko v. David M. BARASCH, Kevin F. O'Toole, Richard G. Jewell, Sean Logan, Kathy M. Manderino, Merritt C. Reitzel, William H. Ryan, Jr., and Dante Santoni Jr., Members of the Pennsylvania Gaming Control Board, in their official capacities Paul Mauro, Director of the Pennsylvania Gaming Control Board's Bureau of Investigation and Enforcement, in his official capacity Cyrus Pitre, Director of the Pennsylvania Gaming Control Board's Office of Enforcement Counsel, in his official capacity and Josh Shapiro, Attorney General of Pennsylvania, in his official capacity
- Cited By
- 2 cases
- Status
- Published